Why the Lawsuit Against OPM over the Massive Data Breach Faces an Uphill Battle

OPM Director Katherine Archuleta, left, and others, are sworn in on Capitol Hill in Washington, Wednesday, June 24, 2015, prior to testifying before the House Oversight and Government Reform Committee hearing on recent cyber attacks. From left are, Archul

OPM Director Katherine Archuleta, left, and others, are sworn in on Capitol Hill in Washington, Wednesday, June 24, 2015, prior to testifying before the House Oversight and Government Reform Committee hearing on recent cyber attacks. From left are, Archul (AP Photo/Susan Walsh)

Demonstrating damages have been suffered will be the challenge, legal experts say.

A class action lawsuit against the Office of Personnel Management over a massive breach of federal employees’ data faces an uphill battle, privacy law experts say.

The American Federation of Government Employees says OPM and a contractor violated the 1974 Privacy Act by neglecting to secure employees' personal data, which resulted in financial and emotional harm.

The failure to protect workers’ data could hold up in court, but demonstrating damages have actually been suffered will be the challenge, legal experts say. The suspected thieves in this situation are foreign government spies aiming for access to U.S. secrets, not financial fraudsters seeking access to people’s bank accounts.

The real harm done for a federal employee or job applicant is now "living for the rest of your life knowing that all of your personal information is in the hands of another country and possibly terrorists, or possibly people that want to do harm to you, your family or the country,” said Cheri Cannon, a partner at federal employment law group Tully Rinckey. “The United States can't fix that."

But neither can any lawsuit, said Cannon, a former military attorney who says she's affected by the breach. AFGE, the country's largest government employee union, filed suit in U.S. District Court on Monday against the agency, OPM Director Katherine Archuleta, OPM Chief Information Officer Donna Seymour and the contractor, KeyPoint Government Solutions, which conducts background investigations for the government.

Past data breach cases resting on the Privacy Act largely have been unsuccessful. 

According to AFGE’s complaint, OPM disregarded federal information security statutes and inspector general recommendations dating back to 2007.

Last month, OPM acknowledged a breach of 4.2 million personnel records, containing Social Security numbers, and the compromise of an undefined number of invasive background investigations on individuals with access to classified intelligence.

Claiming that OPM knew its networks were vulnerable to attack and did nothing “opens the door a little bit wider" for making a case, said Cannon, a former Air Force deputy general counsel for fiscal, ethics and administrative law, who at one point held a security clearance. She said she has been notified her personnel records were compromised by one of the hacks. The government has not notified victims of the background check breach.

Demonstrating the Agency Did Not Lock the Door

“AFGE has compelling case, particularly because OPM was on notice as to the security vulnerabilities," said Marc Rotenberg, president of the Electronic Privacy Information Center. "It doesn’t matter who committed the breach. The central question is whether the federal agencies took necessary measures to protect the information collected."

By law, the agency was obligated to protect the volumes of information it collects. 

That likely is why defendant OPM head Archuleta has consistently said she is "angry" about the hacks but has not expressed remorse. Archuleta and other OPM officials "cannot apologize or take responsibility for" the breach publicly on Capitol Hill or in the press because that would hurt their legal defense, Cannon said.

OPM officials Tuesday would not comment on the lawsuit.

In the past, Archuleta has insisted no one in the government is personally responsible for the network intrusion, rather the hackers are to blame. Background check provider KeyPoint Government Solutions, from whom hackers stole a credential to open OPM systems, says the company has seen no evidence it is responsible for the breach.  

AFGE’s complaint states the damages employees have or will suffer include "pecuniary losses, anxiety and emotional distress," caused by among other things the compromise of personal information belonging to themselves, relatives, neighbors and acquaintances contained in investigative records.

Also listed among the harms inflicted is "lost opportunity costs" associated with the effort and time spent preventing ID and medical theft.

Proving Your Data Has Been Misused

But past Privacy Act verdicts have narrowly defined who is eligible for compensation when personal data is compromised.  

In 2004, the Supreme Court ruled an individual can file suit against the government to recover financial damages when such information is exposed -- but only if an "actual damage" is proven. The definition of "actual damage" was left open in the case, which involved miners suing the Labor Department for disclosing their Social Security numbers. 

In 2012, the high court decided an individual -- in that case, a Federal Aviation Administration employee whose HIV-positive status was divulged -- cannot claim financial damages based on mental or emotional distress caused by a federal agency's intentional or willful violation of the Privacy Act.

In 2011, SAIC and the Pentagon were sued under the Privacy Act when Tricare military health insurance data on 4.9 million service members and their families was stolen. A D.C. federal judge dismissed most of the charges in May 2014, ruling that data loss alone, without evidence the information was misused, did not merit damages. 

There have been recent legal proceedings that suggest some sort of settlement agreement might be brokered.

The National Labor Relations Board ruled earlier this year the U.S. Postal Service violated labor laws by not at least negotiating with postal unions on the agency’s response to its employees’ data being hacked in 2014.

In addition, the Supreme Court will hear a case in the next term, starting in October, that could set a new standard for whether data breach lawsuits can be based on future harm.

"The impossibility of forecasting what will happen to stolen data has intensified legal wrangling over the rights of data breach victims," the Intercept reported in a June 12 article on the upcoming case that cited the OPM incident.

Up until now, the precedent on fear of prospective losses has been a 2013 decision, Clapper v. Amnesty International USA, where journalists and human rights advocates unsuccessfully sued for suffering the cost and inconvenience of protecting themselves against the likelihood of warrantless digital surveillance.

The forthcoming high court case addresses whether an unemployed Virginia man has legal standing to sue the search site Spokeo because it allegedly published incorrect details about his education, wealth and age, which he says hurt his employment chances.

Justice Department Staff v. Justice Department Staff?

According to AFGE, the union will contend federal workers suffered damages from the moment personal data was stolen. The union has not provided the amount of money being sought, explaining the total sum will be figured out during the discovery period. 

Costs already incurred involve replacing credit cards, closing accounts and other steps individuals may have taken in response to the breach, officials said during a Tuesday call with reporters. One attorney representing the union stressed employees do not have to be victims of identity theft to demonstrate damages.

It will also be interesting to see how breach victims at the Justice Department, which must defend claims against the United States, will handle legal proceedings. 

"Justice lawyers are working against their own financial interests – they have a stake in OPM winning for their own personal financial reason," Cannon said. 

The complaint excludes “any judicial officer assigned to this case,” OPM, Archuleta, Seymour and KeyPoint as members of the proposed class action lawsuit. 

“The Justice Department is reviewing the complaint,” DOJ spokeswoman Nicole Navas said, declining to comment further.

Rotenberg said he doubts the question of conflict of interest will lead to recusal. 

The irony is that, although the Supreme Court has narrowed the legal protections established in the Privacy Act, "personal records of the justices, their clerks and staff were likely among those disclosed in the OPM breach," he said.